Student Loan Grace Period Interest Calculator
Grace-period interest: what this calculator estimates
A student loan grace period is the window between leaving school (or dropping below half-time enrollment) and when required payments begin. Even though you’re not making payments yet, many loans—especially unsubsidized federal loans and most private loans—continue to accrue interest. This calculator estimates:
- Interest accrued over the grace period
- Ending balance at repayment start (with or without capitalization, depending on the checkbox)
If your loan is subsidized, interest typically does not accrue during the grace period (subject to program rules and eligibility). If you have multiple loans, run the calculator once per loan (rates and balances can differ), then add the results.
How interest accrues during a grace period
Interest accrual rules vary by lender and loan type. Many student loans accrue interest daily based on a daily periodic rate; some disclosures and servicing systems effectively behave like daily simple interest that accrues each day and is posted periodically. For transparency and usability, this calculator uses a standard monthly-growth approximation based on the annual interest rate you enter.
Core variables
- P = starting principal (your loan balance at the beginning of grace)
- APR = annual interest rate (percent). Convert to decimal: r = APR / 100
- n = grace period length in months
Monthly compounding approximation (used here)
The estimated balance after n months is:
Then the interest accrued over the grace period is:
Interest accrued = B − P
Capitalization (what the checkbox means)
Capitalization means unpaid accrued interest is added to your principal. After capitalization, future interest accrues on a larger principal, increasing total cost over time. In many federal-loan scenarios, interest can capitalize at the end of grace or after certain events (for example, leaving a deferment/forbearance period), but the exact timing depends on the loan program and the rules in effect.
- If you check “Capitalize interest at end,” the calculator treats the accrued interest as added to the balance at the end of the grace period.
- If you leave it unchecked, the calculator still reports accrued interest, but your “principal” is conceptually unchanged (your servicer may still track accrued interest separately until it capitalizes or is paid).
Interpreting your results
Use the outputs to answer three practical questions:
- How much interest will accumulate before my first payment? That’s the “Interest accrued” figure.
- Will my balance be higher when repayment starts? If capitalization applies and you don’t pay the interest before the grace period ends, the “Ending balance” will be higher than the starting balance.
- Is it worth paying during grace? Even small payments aimed at interest can prevent capitalization and reduce the balance that drives future interest.
As a rule of thumb, the factors that move the result most are: (1) your interest rate, (2) the number of months in grace, and (3) whether interest is subsidized or not.
Worked example
Scenario: You have a $20,000 loan at 5.00% APR and a 6-month grace period.
- Convert APR to decimal: r = 0.05
- Monthly rate: r/12 = 0.05/12 ≈ 0.0041667
- Ending balance estimate:
B = 20000 × (1 + 0.05/12)6 ≈ 20000 × 1.02526 ≈ $20,505.20
- Accrued interest: $20,505.20 − $20,000.00 = $505.20
How to use this: If your loan’s rules cause interest to capitalize at the end of grace and you make no payments, you may effectively start repayment owing about $505 more than you borrowed (for that loan). If you pay that interest before capitalization, you can keep your principal closer to the original $20,000.
Sample outcomes (how rate and time change the result)
| Starting balance | APR | Grace (months) | Estimated accrued interest |
|---|---|---|---|
| $10,000 | 4% | 6 | ≈ $201 |
| $15,000 | 5% | 6 | ≈ $379 |
| $25,000 | 6% | 9 | ≈ $1,145 |
| $35,000 | 7% | 6 | ≈ $1,234 |
What to notice: Adding a few months or a couple of percentage points can move the interest meaningfully—especially on larger balances. This is why capitalization (starting repayment with a higher balance) can increase costs over the full life of the loan.
Ways to reduce grace-period costs
- Pay the interest only during grace (if allowed). This targets the amount most likely to capitalize.
- Make a one-time payment near the end of grace to cover accrued interest before capitalization.
- Confirm loan type and rules: subsidized vs unsubsidized, private lender capitalization policy, and whether interest accrues during grace.
- Track multiple loans separately: different disbursements and rates can accrue differently.
Assumptions & limitations (important)
- Compounding/accrual method: This calculator uses a monthly-rate growth approximation (r/12) over whole months. Many real student loans accrue interest daily using a daily periodic rate and may not compound monthly in the same way.
- Whole months: Grace period is entered in months. Partial months, exact day counts, leap years, and posting schedules are not modeled.
- No payments during grace: The estimate assumes you do not make payments during the grace period. Any payments would reduce accrued interest and/or principal depending on servicer rules.
- Capitalization timing varies: The checkbox models capitalization at the end of grace, but real capitalization rules depend on loan program, lender, and events (deferment/forbearance, repayment plan changes, etc.).
- Rounding: Servicers often round interest daily and post periodically; your actual figure can differ slightly.
- Estimates, not statements: Results are for planning and budgeting; for exact payoff and accrual details, check your loan disclosure or servicer account.
Next step
Enter your balance, rate, and grace-period length to estimate what may accumulate before repayment begins. If you’re unsure whether your interest will capitalize, try both settings to see the range of outcomes and plan a strategy (interest-only payments or a lump-sum payment) to avoid surprises.